PHA CEO Dr Rachel David spoke with Hamish McDonald about medical device pricing

Station: Radio National
Program: Breakfast
Date: 12/06/2023
Time: 6:51 AM
Compere: Patricia Karvelas
Interviewee: Dr Rachel David, CEO, Private Healthcare Australia


HAMISH MACDONALD: The dominoes continue to fall for PWC as more details of its contracts with government and business come to light. Most recently, it’s been found that PWC reviewed the Health Department’s pricing of prosthetics. At the same time, it consulted the peak body for multinationals making those same prosthetics. The company has repeatedly said that it has processes in place to address any conflicts of interest. Rachel David is the CEO of Private Health Care Australia. She wrote to the Government about her concerns around PWC’s contract earlier this year. Welcome to the programme.
RACHEL DAVID: Morning, Hamish.
HAMISH MACDONALD: Can you explain what we pay for these sorts of prosthetics in Australia compared with other countries?
RACHEL DAVID: Well, look, when we say prosthetics, what we mean is the commonly used medical devices and items in surgical procedures. So everything from pacemakers that go into the heart, to cataracts, the artificial lenses that were used cataracts, hip and knee replacements, and all of the nuts and bolts and plates and screws that are used in surgery. The problem is that for many years the Commonwealth has regulated the benefits that health funds, other forms of insurers and veteran’s affairs, pay for these things, for about 11,000 of these things, and due to some mistakes that were made back in 2006, these benefits are set far too high compared to other countries, and there’s been various processes put in place to deflate them, which has been happening at a glacial pace. So this is a highly contested area. So I’ll give you an example about just how- what the gap that we’re talking about. So in Australia, there’s a commonly used pacemaker that costs about- on this prosthesis list or medical devices list, costs close to $8,000. And yet the price in countries all over Europe, Sweden, Germany, Austria is just over $1,000. So we pay in Australia 30 to 100 per cent more than other comparable countries for these commonly used items. And that flows through to higher health fund premiums, but also to higher costs through the whole health economy, including the public sector, because it just pushes the floor price up for these things. So it’s highly contested and the multinational companies have lobbied for years to keep prices high, hence why they hired PWC.
HAMISH MACDONALD: Yeah. So what is the possible conflict of interest that you’re alleging here with regards to PWC?
RACHEL DAVID: So the multinationals that sell these things in Australia have a peak body called the MTAA that represents- it doesn’t represent Australian companies that manufacture in Australia, but for the most part, the US multinationals, and they hired PWC to do their pricing work basically to allege or to claim that the gap between the prices that we need to pay in Australia and other countries was not nearly as large as the data that we had suggested. But at the same time, the Department of Health was using them to review certain parts of the prosthesis or the medical device funding list. And not only that, the independent Aged Care Hospitals pricing authority is the fourth largest user of PWC and they are the organisation that is tasked, not just with setting prices for hospitals and aged care, but to advise the Department on the prices for medical technology as well. So in fact, PWC was advising both sides.
HAMISH MACDONALD: But PWC in response to these reports says that it has processes in place to address any possible conflicts of interest and that they were followed before any of these engagements were accepted. Do you acknowledge that?
RACHEL DAVID: Well, look, I find it very- I understand that, you know, consulting firms do have what they call or what they used to call Chinese walls. So, you know, you could have one part of the organisation working on one project and another and they wouldn’t communicate. But the trouble is, these things and these beliefs that, oh, you know, this isn’t so much of a problem as the sector believes it is, then become entrenched in the organisation and we- and it becomes a kind of accepted truth that, you know, there’s not really anything to see here. And, you know, you’re in an environment where it’s just not being challenged, particularly when you’ve got…
HAMISH MACDONALD: [Interrupts] But the- respectfully though, isn’t part of what you’re describing though, pre-dating any of these PWC contracts?
RACHEL DAVID: No, it’s happening now. These contracts are still in place.
HAMISH MACDONALD: But the origins of this problem?
RACHEL DAVID: The origins or the origins of the gap in medical device funding have been going on for several years. But we have been campaigning and advocating for change in this issue, probably reasonably recently from, you know, over the last 5 to 6 years. And over that time, PWC has been involved in advocating for the interests of the US multinationals. And that’s one of the- and that’s why we’ve asked the Department of Health for an explanation and some reassurance that the advice that it’s apparently still relying on from PWC has been independently verified.
HAMISH MACDONALD: And so can you see any direct links though, between the advice that PWC is giving to these multinationals and to government? I mean, is there any evidence of what you’re suggesting?
RACHEL DAVID: Look, Hamish, this is a very highly specialised area. While the value at stake for Australian consumers is high, we estimate that about $1 billion a year is being wasted on paying prices that are far too high. The technicalities of this area are quite challenging. And so, even if we were to say, okay, the perfect processes were in place for there to be- for PWC to be acting appropriately, there are far too few people who know how to provide advice in this area and who have strong expertise in this area. For them to genuinely be able to say that, look, there’s no conflict of interest, there’s just not enough people to provide advice to, you know, to all sides.
HAMISH MACDONALD: On the broader question of the pricing structure, does this have an impact on people’s health ultimately?
RACHEL DAVID: It does in two ways. One is that private health insurance premiums are higher than they need to be because of the inflated costs in this system. And with inflation running as high as it is in Australia with 12 consecutive interest rate rises, the health funds are doing everything they can to keep a lid on health inflation and reducing these inflated benefits is a big part of it. So we’ve been arguing against this idea that, okay, well, it’s not a problem here in Australia. The second issue is that the high benefits and the high benefits we pay in Australia has meant that the multinationals have invested a huge amount in sales and marketing to drive the sales of these products in Australia, and that’s created some real problems with the promotion of medical technology to surgeons, including off label use, which was a factor in some of the big medical technology scandals that we’ve seen here, like the inappropriate use of pelvic mesh, for example, for organ prolapse.
HAMISH MACDONALD: Very briefly, if you could, what do you want the federal government to do?
RACHEL DAVID: Well, look, I think we need some- firstly, we need some immediate reassurance that there isn’t a conflict of interest here with PWC, both with the pricing authority, and the Department of Health. And we need to understand that if they’re relying on this data from PWC, that it’s been independently verified and that we have an independent source of truth about how much Australians really need to be paying for these things.
HAMISH MACDONALD: Rachel David, we’ll have to leave it there. Really appreciate your time this morning. Thank you.
RACHEL DAVID: Thanks, Hamish.
HAMISH MACDONALD: That’s the CEO of Private Healthcare Australia.
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